China ready to move into the trade and world leadership vacuum created by the US

China sends out positive signals

CHINA has sent out stabilising messages to the world on its economic, investment and foreign policies since it convened its two most important annual political meetings (“two sessions”) early this month.

The on-going “two sessions” inevitably attract global attention because China’s policies for the year are announced by top leaders at these meetings held in the imposing Great Hall of The People, to the west of Tiananmen Square in Beijing.

For this year, it is even more crucial for other nations to scrutinise the policies of China at the sessions, held from March 3 to 15, as US President Donald Trump has injected too much uncertainty into the global dynamics.

The world is weighed down by anxiety as Trump, who took office in January, abandons globalisation and advocates the return of protectionism. Hence, nations are looking for leadership from the world’s second largest economy, according to analysts.

The two sessions or lianghui refer to the Chinese People’s Political Consultative Conference (CPPCC) that began its session on March 3 and the annual National People’s Congress (NPC, or Parliament) that started on March 5. The CPPCC is China’s top political advisory body set up by the Communist Party of China (CPC) in 1949 after the CPC, led by Mao Zedong then, won the civil war.

Five years later, the legislative NPC was established.

Steady economic growth

China is expected to grow steadily at 6.5% or higher this year as it continues its restructuring and reforms. Last year, the country achieved growth of 6.7%.

China’s Premier Li Keqiang announced on March 5 that the growth target for this year would be around 6.5%, while he addressed more than 3,000 legislators.

This slower growth target shows China is opting for a steady growth to reduce financial risk from excessive borrowing, according to economists.

Like the rest of the world, China expects to continue to experience global headwinds and uncertainties. Indeed, the premier warned of a far more complicated global picture ahead in light of the threat of protectionism.

Alfred Schipke, an economist from the International Monetary Fund, told the South China Morning Post: “Anything between 6-6.5% will be appropriate. The key is to have sustainable growth.”

For this year, China will have to give its leaders more room to push through some painful reforms to deal with a rapid build-up in debt and over-capacity.

Li said he would tackle state-owned “zombie enterprises” producing more coal and steel than needed. And nationwide pollution, caused largely by heavy industries, has to be addressed to bring back blue skies. His list of China’s difficulties also included laziness of some government officials. But will China’s economy continue to slide?

Global Times, the party mouthpiece of the CPC, has this to say in its frank editorial: “There are many problems in China’s economy at the moment. Given that it is now stable on the whole, we do not fear these problems as they will most likely turn into future opportunities for further development.”

The news portal stated that structural reforms in the Chinese economy had been “comprehensively addressed”.

Many enterprises that are heavy polluters have been shut down. The country no longer helps inefficient enterprises to stay afloat.

The current anti-corruption campaign has curbed improper spending to the extent that businesses in classy restaurants and retail sector are badly hit.

“China’s biggest accomplishments in the past years are that it did not stop to make adjustments in its economic transition. Instead, it adjusted itself while continuing to move forward. Now, society has fully adapted to the new normal in the country’s economy,” said Global Times.

Despite having to tackle its own economic problems, China has sent out a heartening message that it will continue to be the strong engine of global growth. Last year, China contributed about one-third of the world’s economic growth.

“China’s steady growth has brought in greater demand, investment and products to the world economy ... China will help improve global prosperity and regional infrastructure as it pushes its belt and road initiative,” said Wang Guoqing, spokesman for CPPCC on March 3.

More than 100 countries and organisations have joined the belt and road initiative and over 40 of them have cooperation pacts with China, added Wang.

The belt and road initiative, proposed by Xi in 2013, aims to build infrastructure and trade network to link Asia with Europe and Africa along ancient trade routes.

Since 2013, China has financed and gotten involved in projects on aviation, power, rail, road and telecommunications in participating belt-road countries. It is planning to host a belt and road Summit in May that could see China announcing more multi-billion dollar projects to benefit its trade partners and its own economy.

Opening up further

China had also told the world it would open up further and liberalise more sectors to promote trade and investment.

After the opening of the NPC session on March 5, core leader President Xi Jinping reiterated China’s commitment to “open up wider”.

“China will open up like never before. China’s opening door will not close,” said Xi in his report.

“China’s door will open wider, and China will keep working to be the most attractive destination for foreign investment.”

Xi made the remarks while joining in a panel discussion with lawmakers from Shanghai last Sunday, according to the official Xinhua News Agency.

Foreign firms will be able to get listed on China’s stock markets and issue bonds. They will also be allowed to participate in national science and technology projects.

Foreign firms will also be treated as domestic firms in license applications and government procurement, and will enjoy preferential policies like locals under the “Made in China 2025” initiative aimed at modernising the manufacturing sector.

Service industries, manufacturing and mining will be more open to foreign investment.

Ian Yoong, a former investment banker in Malaysia, opines that Xi’s vows to open up and liberalise sectors “shows that China is ready to take over the mantle from the US as the dominant superpower”.

He tells Sunday Star: “The key themes of President Xi and Premier Li’s speeches are globalisation and liberalisation of trade, totally countering President Trump’s plans for the US.

“This is a signal to the world that China is ready to move into the trade and political leadership vacuum to be created by the US.”

Easing tension in South China Sea

For South-East Asian nations, there was some relief when the Middle Kingdom appears to have softened its tone in South China Sea disputes.

In remarks made on March 3, Wang, the spokesman for the CPPCC placed emphasis on “navigational freedom”, which the US has often advocated.

“As a major trading nation and the biggest country along the South China Sea, China attaches more importance than any other country to navigational freedom and security in the South China Sea.”

This stance was starkly different from the hard tone of previous months, during which China warned the US and Japan to stay away from its “own sea”.

Observed Panos Mourdoukoutas, a contributor to Forbes magazine: “The shift in China’s tone in the South China Sea disputes comes as a relief for investors in Asian equities.”

But what is more comforting for Asean is that last Wednesday (March 8), China’s Foreign Minister Wang Yi announced that the first draft of a code of conduct (COC) for behaviour in South China Sea disputes has been completed.

He told a press conference: “Tension in the waterway has eased notably.”

Since 2010, China and the 10-member of Asean have been trying to work out a set of rules aimed at avoiding conflicts among nations laying rival claims over the waters.

China, which lays sovereign claim to over 80% of the resource-rich South China Sea through which US$5tril (RM22tril) worth of trade passes every year, has often stated it prefers to resolve disputes via peaceful talks with rival claimants – the Philippines, Malaysia, Vietnam, Brunei and Taiwan.

Wang vowed China would not allow this new stability in South China Sea to be “disrupted and damaged” by outsiders.

There have been sporadic incidents between US and Chinese ships in the South China Sea. Late last year, a Chinese ship seized a US navy underwater drone off the Philippines, but later returned it.

Korean Peninsula crisis

At his press conference, China’s Foreign Minister also addressed the most pressing issue for the region now – the possibility of a war exploding at Northeast Asia.

North Korea recently launched four short-ranged ballistic missile in response to large-scale military drills held by the US and South Korea. It was reported that these launches were aimed at US military bases in Japan.

Wang proposed “double suspension” to defuse the crisis, urging North Korea to suspend its nuclear and missile activities while the United States and South Korea to cease their war games.

Describing the two parties as “two accelerating trains coming towards each other”, Wang said China was willing to be a “railway switchman” to switch the issue back to the right track.

But US Ambassador to the United Nations Nikki Haley promptly responded that the US must see “some sort of positive action” from North Korea, while Cho Tae-yul, South Korea’s UN ambassador, said: “This is not a time for us to talk about freezing or dialogue with North Korea.”

CPC’s Global Times, in its editorial, opined Wang’s solution is “the only way out” to resolve the North Korean nuclear issue peacefully.

The North Korean nuclear issue is not created by Pyongyang alone, it argued.

Although North Korea’s development of a nuclear programme is wrong, Washington and Seoul are the main forces that have pushed North Korea to this path, it added.

“Now, they want to stop Pyongyang from going ahead, while refusing to reduce the impetus they are giving to North Korea. When they failed to reach their goal, they blame China for not being cooperative enough,” said the editorial.

Despite the negative response to China’s proposal, Global Times opines Wang’s handling of the press conference “displays confidence of the country”.